- Canada GDP up 3% in July, prelim estimate of +1% in August
- Over 70% of decline in spring has been retraced – but very uneven by industry
- Pace of recovery already slowing over the summer, and recent virus resurgence will limit go-forward growth prospects
The increase in GDP was still sizeable in July at 3.0%, and matched Statistics Canada’s preliminary 3% estimate a month ago. But the pace was still down from 6.5% and 4.8% gains in May and June, and the preliminary estimate of August’s growth rate was 1%.
The recovery to-date has been predictably uneven across industries. Some, like retail sales, recovered quickly. And home re-sales have surged over the summer. The industrial sector also continues to improve, although manufacturing output was still running 6% below pre-shock levels in July. Some of the harder-hit industries like accommodation & food services, and arts & entertainment posted the biggest gains in July compared to June but were still well-below pre-shock (February) levels – a third below in accommodation & food services, and more than 50% below for arts, entertainment & recreation. Investment in the oil & gas sector remains very soft despite a tick up in drilling activity in July, and extraction in the sector fell for the fourth time in five months.
The early economic bounce-back has still been surprisingly quick. GDP growth in Q3 is on track to increase at more than a 40% (annualized) rate, and more than 70% of spring declines were retraced by August. But the level of activity overall was also still running almost 5% below pre-shock levels. The unemployment rate was above 10% in August. And the pace of growth in the economy is clearly slowing. A lot of the early recovery has come from re-opening from spring containment measures. And with most COVID-19 containment measures already eased, that boost won’t be repeated going forward. The latest bout of virus spread in Canada has just reinforced that there are probably limits to how much the economy can recover as long as that threat remains with some containment measures, some shutdowns of bars and indoor dining in Montreal and Quebec City for example, already reinstated.
